Yes, you have to report the proceeds from selling your inventory back to the supplier.
When you purchased the products you took a deduction for that when you bought them, unless you report inventory on your tax return at the end of the year. In that case, the cost of the goods purchased would be held in the inventory and not yet deducted.
Since you sold all of your products, you have no inventory at the end of the current year. So, if you reported inventory on your tax return at the end of the previous year, that will be deducted in the current year when your inventory is reduced to $0. So you report the sales proceeds as you will or have deducted the cost of them.
If you didn't record any inventory, then you deducted the full cost of the goods you sold back to Mary Kay already as purchases, so there in no additional deduction you can take. In other words, you deduct the cost of the goods when you buy them as purchases, or when you reduce the inventory to $0, as that offset goes to purchases. So the deduction for the products should already be reflected in your purchases, so you have to report the sale of them to offset the deduction.
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